Progress on the adoption of risk-based financial models has stalled: survey

Stethoscope on top of five, ten, and twenty dollar bills.
Most healthcare organizations are still only experimenting with risk-based models, a new survey finds. (Getty Images/PLG)

In the past four years, little progress has been made in the transition to risk-based models, as healthcare executives remain concerned about the threat of financial losses, a survey by Numerof & Associates finds.

Findings from the fourth annual survey of 500 C-suite healthcare executives suggest that most providers have yet to make a substantial commitment to the population health model as the majority of healthcare organizations are still just experimenting with risk-based contracts.

There is widespread agreement that population health programs are needed and 99% of executives projected their organization will have some revenue in models with upside gain and/or downside risk in two years, according to the survey.

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At the same time, of the respondents in risked-based agreements, the majority reported that 10% or less of revenue came through risk-based contracts. “This measure not only remained flat relative to prior surveys but also fell significantly short of the projections that respondents made previously regarding how much revenue would be at risk in 2018,” according to the report.

In addition, executives’ future projections of revenue at risk were lower than previous forecasts. “This suggests that respondents anticipate slower implementation of population health going forward than they have expected in prior years,” the report said.

Three-quarters of executives reported some experience with an alternative payment contract, but for most (66%) less than 20 of revenue was involved. And, a substantial portion (31%) of organizations with alternative payment contracts have upside-only arrangements with no downside risk.

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Executives were lukewarm about their organization’s ability to manage the cost and quality of care. Just over 60% said their organizations were at least moderately prepared to do so, unchanged from 2017.

“Healthcare is an industry in transition, but the resistance to necessary change is deeply entrenched,” said Rita Numerof, Ph.D., president of the healthcare consulting firm. “Rather than embracing new models that they perceive as risky and difficult to manage, providers are trying to muddle their way through as long as possible.”

Financial risk and cultural complacency continue to outweigh incentives to move organizations forward, according to the survey findings. Executives cited the threat of financial loss as the primary barrier to moving to a risk-based model, followed by other concerns including difficulty in changing organizational culture, issues with systems like IT, tracking, and management, and uncertainty about when to make the transition from the current model.

The survey findings also indicate that smaller healthcare delivery organizations are lagging. While 90% of large hospitals and/or health systems said they had at least one at-risk contract, only 76% of midsized hospitals and 71% of smaller hospitals had a risk-based agreement. “Smaller organizations may have a limited ability to absorb the impact of outliers, but they can make up for it with nimble program design and implementation,” the report said.

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Policy uncertainty at the federal level also may be contributing to administrators’ hesitancy. In particular, the cancellation of several mandatory bundled pricing programs in favor of voluntary versions has raised questions about the future of value-based care, just as many administrators were beginning to accept it as inevitable, according to the report.

Numerof and Abrams also recommended that providers accelerate their progress in population models, or "find themselves scrambling to play catch-up."

“Healthcare delivery organizations may breathe a sigh of relief as policymakers ease the pressure for change, but their comfort should be short-lived, as a slew of nontraditional competitors like Amazon, JPMorgan, Berkshire Hathaway, Apple, Google, and others are on the prowl,” said Michael Abrams, managing partner of Numerof & Associates. “A $3 trillion industry with a deeply dissatisfied customer base is attracting a wave of innovation from entities that aren’t beholden to the old ways of doing business. Ask retailers how effective a strategic crouch works against Amazon.”

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